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Google Bids $900 Million for Nortel Patent Assets

SAN FRANCISCO — Google has bid $900 million for the patent portfolio of Nortel Networks, the Canadian telecom equipment maker, as part of a strategy to defend itself against patent litigation.

The bid, which could grow even larger in Nortel’s bankruptcy auction, would be the third-largest purchase by Google, smaller only than its payments for YouTube and DoubleClick.

The amount of money involved signals how fierce the patent wars have become, particularly in Silicon Valley, where even the largest and most powerful companies like Google are besieged by dozens of patent infringement suits. It also underscores Google’s frustration with the state of the patent reform legislation in Congress.

Though Google could potentially use some of the technology in the Nortel patents in future research, the company said it wanted to buy them to defend against patent litigation. By building a large portfolio of patents, Google keeps them out of competitors’ hands. It also hopes to dissuade other companies from suing it, either because Google holds similar patents to the ones they might sue over or as deterrence — if you sue me, I will sue you.

“The only reason Google’s spending $900 million is because they feel the risk of those patents being in the hands of someone else — a competitor like Apple or a nonpracticing entity — is much greater than $900 million,” said Daniel B. Ravicher, executive director of the Benjamin N. Cardozo School of Law Public Patent Foundation, which advocates patent reform.

Kent Walker, a senior vice president and general counsel at Google, wrote in a company blog post, that “One of a company’s best defenses against this kind of litigation is (ironically) to have a formidable patent portfolio, as this helps maintain your freedom to develop new products and services.”

Google’s bid also highlights the growing importance of its mobile business. Many of the prominent patent suits in the technology industry involve mobile devices, including Android phones. Nortel’s patents are in wireless and telecommunications technologies, as well as other areas important to Google like Internet search and social networking.

“Google is basically buying legitimacy and buying a foothold in one part of the cellphone market,” said Robert P. Merges, director of the Berkeley Center for Law and Technology at the University of California, Berkeley.

After a confidential bidding process, Nortel chose Google’s offer as the starting point for the auction of 6,000 patents, 2,600 of which are in the United States. Nortel said it expected to hold the auction in June.

The dozens of patent lawsuits that Google is fighting include one from Oracle, which has sued Google for patent infringement related to Java software used on the Android mobile device platform, and another from Paul G. Allen, the Microsoft co-founder, who has sued Google and 10 other companies for infringement. Microsoft and Apple have taken aim at Google’s partners developing Android phones. Microsoft has sued Motorola, Apple has sued HTC, and Motorola and Apple have sued each other, to name only a few of the industry patent suits.

Google also faces lawsuits from aggressive collectors of patents like NTP Inc., which are derisively called patent trolls and sue in the hope of forcing a settlement from a large company but generally do not build products themselves.

Mr. Walker said that the motive behind many of the lawsuits was “a desire to block competing products or profit from the success of a rival’s new technology.”

Google, which has never sued for patent infringement, also said it was at a disadvantage compared with competitors with longer histories and bigger patent portfolios. Google has about 630 patents, according to the United States Patent and Trademark Office, while Apple has around 3,830. Microsoft said it has about 18,000.

Google could also use the Nortel patents to protect its partners, like cellphone manufacturers and developers using open-source Android and Chrome software.

Though Google, which declined to comment beyond its blog post, said that it would continue to push for patent reform, the Nortel bid also indicates that it is unhappy with the state of current patent reform legislation.

Congress has tried to reform the nation’s patent system in the hopes of stemming the tide of lawsuits that technology companies say are clogging the courts. The Senate overwhelming passed a patent overhaul bill last month, and the House is beginning action on a similar bill.

However, some technology companies, including Google, opposed the Senate bill after initially signaling some support. The Coalition for Patent Fairness, a trade group whose members include Google, Apple, Cisco, Dell and others, said that the bill did not do enough to limit damages in patent lawsuits or to address other aspects of patent litigation.

The coalition is hoping that those issues will be addressed in a bill under consideration in the House Judiciary Committee.

By publicly announcing its patent bid, Google indicated that in the meantime, the only logical business decision was to buy patents defensively, said Josh Lerner, a professor at Harvard Business School who covers patent policy in the tech industry.

“The healthy thing to do would be real patent reform, both in terms of the way patents are granted and the way patents are litigated,” he said. “But given that seems to be an impossible dream, I would describe this as second-best.”

Edward Wyatt contributed reporting from Washington.

A version of this article appears in print on April 5, 2011, on page B3 of the New York edition with the headline: Google Bids $900 Million For Nortel Patent Assets. Order Reprints|Today's Paper|Subscribe